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Help Your Startup Learn Responsible Spending Habits

Vision, talent, and drive aren’t the only success factors for a fast-paced startup. Disciplined spending is a must too.

Adopt the five habits below, which build responsible spending, into your company's culture early. Patterns like these will eventually pay off by impressing your investors and accelerating your growth.

1. Define acceptable expenses

Invest some time in building clear employee spending guidelines for travel, entertainment and other purchases. Time spent establishing these rules sends an important message about the company’s commitment to careful spending. It also cuts down on spending misunderstandings, which burn cycles (and patience) to resolve.

Let your team know that you are serious about responsible spending by complying with the guidelines yourself. Update and communicate these rules as needed as your staff or business changes.

2. Issue cards ― with good controls

Teaching employees to pay with business cards can give you more precise control over spending when you set parameters based on job role. Developers, for example, can buy the tools and services they need within approved purchase categories. With salespeople, it typically works best to set spending limits. As your company grows, you can set similar controls for new employees and job roles.

Have any employee you give a business card to sign an agreement acknowledging that they have read your spending guidelines. This agreement should include their obligations and consequences in cases of unauthorized use.

3. Mine data for insights

One big payoff of employees using cards for spending is an abundance of detailed data. Even if you have just a few employees now, you can get into the habit of proactively using this data to understand where company funds are going and to look for opportunities to consolidate and streamline spending. Build reports so you can analyze trends and spot outliers, such as unusual expense categories or spending at odd times or on weekends. Reviewing reports by expense category also allows you to quickly see where budgets might be exceeded.

4. Insist on receipts

Get in the habit of requiring employees to submit documentation — such as a receipt or proof of delivery — that supports an expense claim. To prevent abuse via undocumented cash spending, you might require that business cards be used for even minor expenses ― these days, incidental purchases can be put on plastic almost everywhere. Mandating the use of cards also helps ensure that a merchant credit against a claimed expense, such as a refund for returned merchandise, goes back to the company.

5. Review and approve expenses 

Ensuring that all expense reports are reviewed before they’re processed allows you to address out-of-policy spending when it happens. It also lets you grant some flexibility when rules are bent for a good reason. Review your co-founders’ expenses, too — and have them review yours. This helps to reinforce a culture of accountability and sends the right message to your team.

Putting these five good habits in place can feel challenging in a fast-paced, entrepreneurial culture that tends to celebrate disruption over following established practices. But company leaders who are bold enough to adopt solid policies around spending know that in the long run, they are protecting the ability of the business to execute on its vision.

This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. You should obtain relevant and specific professional advice before making any investment or other decision. Silicon Valley Bank is not responsible for any cost, claim or loss associated with your use of this material.

About the Author

Liam Fairbairn is a senior vice president in the Early Stage Practice for SVB in the San Francisco Bay Area, where he specializes in serving seed-stage technology companies in the enterprise software, consumer internet and frontier tech sectors. As a relationship manager, he delivers the fast and flexible banking solutions innovators demand. As an advisor, he strives to be each client’s first point of contact when they’re looking to connect with value-add partners in the tech ecosystem who can help entrepreneurs set visionary ideas in motion.

Liam thrives on being at "the tip of the spear" — witnessing game-changing breakthroughs before they impact the world. He’s savored this vantage point again and again throughout his 20-plus years at SVB. While working on a team focused on infrastructure software, he advised tech companies as they transitioned from hardware to cloud-based information delivery. Liam previously partnered with equally groundbreaking entrepreneurs, including life science visionaries in the medical device, biotechnology, diagnostics, nanotechnology and healthcare IT sectors. He holds a bachelor’s degree in finance from Santa Clara University, where he was awarded a scholarship and played Division 1 baseball for the Broncos all four years. Liam also has the distinction of finishing his college career ranked No. 22 in the country by Baseball America in 1997.

Outside of work, Liam currently serves on the board of the San Carlos American Youth Soccer Organization (AYSO) and coaches Little League baseball and softball. He also enjoys life at home in his native Bay Area with his wife and two children, and spends as much time as possible outdoors, especially in Hawaii where he has a large contingent of family. However, Liam feels quite at home at SVB, too, as his sister, wife and sister-in-law all work for the bank.

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